01—Abstract
Summary
Summary of the 8-K filed June 8, 2000. Cited figures are marked; the original filing is the authoritative source.
On June 8, 2000, Procter & Gamble announced a leadership change and a sharp cut to its fiscal 2000 outlook.
The Board elected Alan G. Lafley, then president of global beauty care and North America, as President, Chief Executive and director, effective immediately. John E.
Pepper, retired from P&G, returned as Chairman of the Board. Durk I. Jager, Chairman, President and CEO, retires effective July 1, 2000, after 30 years of service.
The filing notes that the company changed too much too fast under the Organization 2005 initiative, and Lafley said the transition would take about a year longer than expected. The financial guidance is significantly weaker. Fourth-quarter core diluted EPS is now expected to be flat year-over-year, versus prior guidance of a 15-17%a increase.
Volume growth is now estimated at 1-2%b, reflecting competitive pressure and reduced marketing support in fabric and home care. Sales growth is expected at 2-3%. Full-year core EPS growth is now about 4%.
For fiscal 2001, core EPS growth is guided to 11-13%c above the revised base. For investors, the key issues are the earnings miss, the credibility of the revised outlook, and execution risk under a new CEO.
The filing gives no quantified cost-reduction targets, and Lafley said he would spend six weeks reviewing initiatives and investment choices before making decisions. Investors should watch for those decisions and for whether the fiscal 2001 double-digit EPS growth target is achievable.
02—Key points
Key Highlights
- Leadership change: A.G. Lafley named President, CEO and director effective immediately; John E. Pepper returns as Chairman
- Durk Jager retires effective July 1, 2000, after 30 years of service
- Q4 FY2000 core diluted EPS now expected flat year-over-year, down from prior guidance of 15-17% growth
- Q4 volume growth revised to 1-2%, citing competitive pressure and reduced marketing support in fabric and home care
- Full-year FY2000 core EPS growth now about 4%; Q4 sales growth expected at 2-3%
- FY2001 core EPS growth guided to 11-13% above the revised FY2000 base
- Management acknowledged the Organization 2005 transition changed too much too fast and will take about a year longer
03—Questions
Frequently Asked Questions
Why did P&G lower its earnings outlook?
P&G cited lower volume growth, now 1-2%, driven by competitive pressures and reduced marketing support on several key businesses, including fabric and home care. Management said the pace of change under Organization 2005 contributed, and that it had not made enough tough choices to balance top- and bottom-line growth.
Who is leading P&G now?
A.G. Lafley, previously president of global beauty care and North America, became President, CEO and a director effective June 8, 2000. John E. Pepper, who had retired from P&G, returned as Chairman to support Lafley and focus on external matters. Durk Jager retires effective July 1.
What is the outlook for fiscal 2001?
P&G expects core EPS growth of 11-13% above the revised fiscal 2000 base. Investors should note that this follows a year of earnings disappointment, so achieving it will depend on the decisions Lafley makes after his six-week review of investments and cost control.
What will the new CEO do next?
Lafley said he would spend the following six weeks reviewing new and established business initiatives, making investment choices to balance top- and bottom-line growth, and pursuing tighter cost control. He also said the company must return its large core businesses to consistent year-over-year sales and profit growth.
Does the filing quantify cost savings or specific restructuring actions?
No. The filing describes the intent to improve cost control but gives no dollar amounts, savings targets, or restructuring charges. Those details would need to come from later announcements or periodic reports.
04—Continue